Channel

1. Logistics - Coordinating the flow of information, goods, and services among members of the distribution channel.

2. Supply-chain management - Control of the activities of purchasing, processing, and delivery through which raw materials are transformed into products and made available to final consumers.

3. Physical Distribution

3.1. Characteristics

3.1.1. Customer Service - Level of customer service the distribution activities should support.

3.1.2. Transportation - Ways of firm to move their products

3.1.3. Inventory Control - Allocation of inventory a firm should maintain at each location

3.1.4. Protective Packaging and Materials Handling - Ways a firm packages and efficiently handle goods in factory, warehouse and transport terminals

3.1.5. Order Processing - Ways for firm to handle order.

3.1.6. Warehousing - Where the distribution system will locate stocks of goods and the number of warehouses the firm should maintain

3.2. Problem of Suboptimization

3.2.1. Results when the managers of individual physical distribution functions attempt to minimize costs, but the impact of one task on the others leads to less than optimal results

3.2.2. Effective management of physical distribution requires cost trade-offs

3.3. Customer-service Standards

3.3.1. State the goals and define acceptable performance for the quality of service that a firm expects to deliver to its customers

3.3.2. Designers then will assemble other physical distribution components to meet these standards at the lowest possible total cost

3.4. Transportation

3.4.1. Class of Carriers

3.4.1.1. Common Carriers

3.4.1.1.1. Considered the backbone of transportation industry, provide transportation services as for-hire carriers to the general public.

3.4.1.1.2. Government regulates the rates and services

3.4.1.1.3. Includes all modes of transport

3.4.1.2. Contract Carriers

3.4.1.2.1. For-hire transporters that do not offer services to general public.

3.4.1.2.2. Establish contracts with individual customers and operate exclusively for particular industries.

3.4.1.2.3. Has much looser regulations than common carriers.

3.4.1.3. Private Carriers

3.4.1.3.1. Does not offer services for hire

3.4.1.3.2. Provide transportation services soley for internally generated freight

3.4.1.3.3. No rate or service regulations

3.4.2. Major Transportation Modes

3.4.2.1. Railroads

3.4.2.1.1. Largest share of freight business

3.4.2.1.2. Usually transport huge quantities of products (usually raw materials) over long distances.

3.4.2.1.3. Intermodal Operation - Combination of transport modes, to improve customer service and achieve cost advantages.

3.4.2.2. Motor Carriers

3.4.2.2.1. Fast shipments and consistent service for large and small shipments.

3.4.2.2.2. Concentrate on shipping manufactured products

3.4.2.2.3. Receives greater revenue per ton shipped

3.4.2.3. Water Carriers

3.4.2.3.1. Move products over water

3.4.2.3.2. Barge lines transports bulky , low unit value commodities. Ocean going carry growing stream of containerized freight between ports around world. Ships carry large, refrigerated containers called "reefers" for transporting everything from fresh produce to medical supplies.

3.4.2.3.3. Freight rates are based on the size of the vessel, cost of fuel and security measures

3.4.2.4. Pipelines

3.4.2.4.1. Ranked third in ton-miles transported.

3.4.2.4.2. Offers low maintenance and is dependable

3.4.2.4.3. Have fewer locations and can accommodate small number of products as well as a slow method of transportation

3.4.2.5. Air Freight

3.4.2.5.1. Transports low value products or heavy mass-market goods

3.4.2.5.2. Increasing in demand

3.4.3. Freight Forwarders and Supplemental Carriers

3.4.3.1. Act as transportation intermediaries that consolidate shipments to gain lower rates for their customers

3.4.3.2. Logistics manager can ship products via a number of auxiliary, or supplemental, carriers that specialize in small shipments

3.4.4. Intermodal Coordination

3.4.4.1. Piggyback - Most widely used form of intermodal coordination

3.4.4.2. Birdyback service - Sends motor carriers to pick up a shipment locally and deliver that shipment to local destinations

3.4.4.3. Fishyback service - Intermodal coordination system between motor carriers and water carriers

3.5. Warehousing

3.5.1. Storage Warehouse - Holds goods for moderate to long periods in an attempt to balance supply and demand for producers and purchasers

3.5.2. Distribution Warehouse - Assembles and redistributes goods, keeping them moving as much as possible

3.5.3. Automated Warehouse Technology - Cut distribution costs and improve customer service

3.5.4. Warehouse Locations - Influenced by warehousing and materials handling costs and delivery costs from warehouses to customers as well as affecting the customer service

3.6. Inventory Control System

3.6.1. Companies must balance maintaining enough inventory to meet customer demand with incurring unneeded costs for carrying excess inventory

3.6.2. Keep inventory levels under control by using few tools such as Just-in-time (JIT), RFID technology and Vendor-managed inventory (VMI)

3.7. Order Processing

3.7.1. Directly affects firm’s ability to meet customer service standards

3.7.2. Consists of 4 major activity

3.7.2.1. Conducting credit check

3.7.2.2. Keeping a record of sale

3.7.2.3. Making appropriate accounting entries

3.7.2.4. Locating orders, shipping orders, and adjusting inventory records.

3.8. Protective Packaging and Materials Handling

3.8.1. Materials handling system - Activities for moving products within plants, warehouses, and transportation terminals

3.8.1.1. Unitizing - Combining as many packages as possible into each load that moves within or outside a facility

3.8.1.2. Containerization - Combining several unitized loads into a single, well protected load for shipment

4. Distribution - Movement of goods and services from producers to customers.

5. Marketing (distribution) channel - System of marketing institutions that enhances the physical flow of goods and services, along with ownership title, from producer to consumer or business user.

6. Physical distribution - Broad range of activities aimed at efficient movement of finished goods from the end of the production line to the consumer.

7. Role of Marketing Channels in Marketing Strategy

7.1. Facilitate exchange process by reducing number of marketplace contacts necessary to make a sale.

7.2. Adjusting for discrepancies in the market’s assortment of goods and services via sorting.

7.3. Standardizing exchange transactions by setting expectations for products.

7.4. Facilitating searches by both buyers and sellers.

8. Type of Marketing Channels

8.1. Marketing Intermediary - Organization that operates between producers and consumers or business users.

8.1.1. Resellers (wholesaler and retailers) take ownership of the products.

8.1.1.1. Wholesaler – Firms that acquire large quantities of products from manufacturers/producers and then sort, store and resell them to retailers, businesses or sometimes end consumers. Takes title to the goods it handles.

8.1.1.2. Retailers – All channel members who are involved in selling products or services to consumers. Takes title to the goods it handles.

8.1.2. Brokers and facilitators do not take ownership of the products.

8.1.2.1. Brokers (Agent) - People who facilitate the exchange of products but do not take title to anything that they sell.

8.1.2.2. Facilitators (Transportation Companies) – Organizations that assists in the distribution of products but do not take title or negotiate sales.

8.2. Direct Selling

8.2.1. Direct Channel - Marketing channel that moves goods directly from a producer to the business purchaser of ultimate user.

8.2.2. Direct Selling - Marketing strategy whereby producer establishes direct sales contact with its product's final users.

8.2.2.1. Beneficial for options of goods and services that requires extensive demonstration to convince customer to buy.

8.2.2.2. Plays a significant role to B2B and B2C markets.

8.2.2.3. One of the main channels of direct selling is the Internet.

8.3. Channels Using Marketing Intermediaries

8.3.1. Producer to Wholesaler to Retailer to Consumer

8.3.1.1. Suitable for small retailers and producer

8.3.1.1.1. `

8.3.1.2. Large amount of retailers to market

8.3.1.3. Involves more than one intermediary before the product gets into the hands of the consumer.

8.3.1.4. Draws on a wholesaler's specialized distribution skills.

8.3.2. Producer to Wholesaler to Business User

8.3.2.1. Industrial Distributor - Intermediaries in the business market that take title to goods.

8.3.3. Producer to Agent to Wholesaler to Retailer to Consumer

8.3.3.1. Middleman (Agent), assists with the negotiation between the manufacturer and the seller.

8.3.3.1.1. Agent is important when producers need to get their product into the market as quickly as possible.

8.3.3.2. All participants in this channel benefits each other by generating greater output in further profitability, by discernment and exploring newer markets of sales and building a better business relationship.

8.3.3.3. Participants need to have knowledge and experience for effective maintenance of target segments and competitive advantage.

8.3.4. Producer to Agent to Wholesaler to Business User

8.3.4.1. An agent or broker, often called a manufacturer’s representative, markets small producer’s offerings through large wholesalers.

8.3.4.2. Provides an independent sales force to contact wholesale buyers.

8.3.5. Producer to Agent to Business User

8.3.5.1. Independently owned wholesaler takes title to the goods.

8.3.5.2. Common in transactions with large unit sales in which transportation is a small percentage of the total cost.

9. Dual Distribution

9.1. Network that moves producers to a firm's target market through more than one marketing channel.

9.2. Tool used to maximize firm's coverage in marketplace or increase cost effectiveness of firm's marketing effort.

10. Reverse Channels

10.1. Designed to return goods to producers.

10.2. Beneficial because of rising prices for raw materials, causing increase in recycling facilities and passage of additional antipollution and conservation laws.

10.3. Also handle products repairs and recalls

11. Channel Strategy Decisions

11.1. Selection of a Marketing Channel

11.1.1. Market Factors

11.1.1.1. Affected target market.

11.1.1.2. Market's needs, geographical location and average order size.

11.1.2. Product Factoprs

11.1.2.1. Perishable goods (Goods that need to be used in short period of time) and fashion move through short term channel

11.1.3. Organizational and Competitive Factors

11.1.3.1. Companies with solid standing in market have less needs for intermediaries.

11.1.3.2. Firm with broad product line can market products directly to retailer or business users.

11.1.3.3. Manufacturers have control over marketing and channel selection

11.1.3.4. Business that explore new marketing channel must be careful to avoid upsetting their channel intermediaries.

11.2. Determining Distribution Intensity

11.2.1. Intensive Distribution

11.2.1.1. Distribution of a product through all available channels.

11.2.1.1.1. Example: Mineral waters sold around UTHM.

11.2.2. Selective Distribution

11.2.2.1. Distribution of a product through a limited number of channels.

11.2.2.1.1. Low-end to Mid-end cars (e.g. Honda)

11.2.3. Exclusive Distribution

11.2.3.1. Distribution of a product through a single wholesaler or retailer in a specific geographic region.

11.2.3.1.1. High-end luxury cars (e.g. Lamborghini)

11.2.4. Legal Problems of Exclusive Distribution

11.2.4.1. Exclusive Dealing Agreements

11.2.4.1.1. Prohibits marketing intermediary from handling competing products.

11.2.4.2. Closed Sales Territories

11.2.4.2.1. Restricts distributors to certain geographic regions.

11.2.4.3. Tying Agreements

11.2.4.3.1. Allow channel members to become exclusive dealers only if they also carry products other than those that they want to sell.

11.3. Who Should Perform Channel Functions

11.3.1. Member of channel must perform certain central marketing functions.

11.3.1.1. Each member may have varying responsibilities.

11.3.1.2. Independent intermediary must earns profit in exchange for providing services to manufacturers and retailers.

11.3.1.3. Intermediary must provide better service at lower cost than manufacturers or retailers.

12. Channel Management and Leadership

12.1. Channel Captain - Dominant and controlling member of a marketing channel.

12.2. Channel Conflict

12.2.1. Horizontal Conflict

12.2.1.1. Results from disagreements among channel members at same level.

12.2.1.2. Causes sparks between different types of marketing intermediaries that handle similar products.

12.2.2. Vertical Conflict

12.2.2.1. Resulting in frequent and severe conflict.

12.2.2.2. Channel members from different levels find many reasons for disputes.

12.2.3. The Grey Market

12.2.3.1. Refers to flow of new good through distribution channels other than authorized or intended by manufacturer or producer.

12.3. Achieving Channel Cooperation

12.3.1. Effective cooperation among channel members is needed.

12.3.2. Achieved when all channel members regard themselves as equal components of same organization.

12.3.3. Channel captain plays an important role in providing leadership to achieve cooperation.

13. Vertical Marketing Systems

13.1. Planned channel system design to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain.

13.2. Achieve this through forward or backward integration

13.2.1. Forward Integration - Attempts to control downstream distribution.

13.2.2. Backward Integration - Occurs when manufacturer attempts to gain greater control over inputs in its production process

13.3. Benefits

13.3.1. Improves chances for controlling and coordinating steps in distribution or production process.

13.3.2. Lead to development of economics of scale that ultimately saves money.

13.3.3. Lets manufacturer assumes increased risk when it takes control of entire distribution chain

13.4. Disadvantage

13.4.1. Manufacturers may discover they lose some flexibility in responding to marketing changes

13.5. Corporate and Administered Systems

13.5.1. Corporate Marketing Systems - Vertical marketing system where single owner operates the entire marketing channel.

13.5.2. Administered Marketing Systems - Vertical marketing systems that achieves channel coordination when a dominant member exercise its power.

13.6. Contractual Systems

13.6.1. Contractual Marketing System = Vertical marketing systems that coordinates channel activities through formal agreements among participants.

13.6.2. Wholesaler-Sponsored Voluntary Chain

13.6.2.1. Independent wholesaler will preserve a market by strengthening its retail customer

13.6.2.2. Wholesaler adopts a formal agreement with its retailers to use common name and standardized facilities and purchase wholesaler's goods

13.6.2.3. May develop line of private brands stocked by retailers

13.6.2.4. Helps smaller retailers compete with rival chains as well as strengthens wholesaler's position.

13.6.3. Retail Cooperative

13.6.3.1. Group of retailers establishes shared wholesaling operation to help compete with chains.

13.6.3.2. Retailers purchases ownership shares in wholesaling operation and agree to buy minimum percentage of their inventories

13.6.3.3. Members usually adopt a similar store name and common private brand

13.6.4. Franchise

13.6.4.1. Wholesaler/Dealer agrees to meet operating requirements of a manufacturer or other franchiser.

14. Logistics and Supply Chain Management

14.1. Effective logistics requires proper supply chain management and control of the activities of purchasing, processing, and delivery.

14.2. Supply Chain - Complete sequence of suppliers and activities that contribute to the creation and delivery of merchandise.

14.2.1. Begins with raw-material inputs for production

14.2.2. Ends with the movement of final product to customers

14.2.3. Takes place in two directions: upstream and downstream

14.3. Radio Frequency Identification (RFID)

14.3.1. Technology that uses a tiny chip with identification information that can be read by a scanner using radio waves from a distance.

14.3.2. Grant access to restricted area to employees

14.3.3. Speed up deliveries

14.3.4. Make consumer bar code obsolete

14.3.5. Provide marketers with valuable information about customer preferences

14.3.6. Used to manage inventory flow

14.4. Enterprise Resource Planning (ERP)

14.4.1. Integrated software system that consolidates data from among firm's units.

14.4.2. 2/3 ERP system users are manufacturers concerned with production issues such as sequencing and scheduling

14.4.3. However, ERP also is an unreliable tool.

14.5. Logistical Cost Control

14.5.1. Main objectives of focusing on logistics is to cut costs.

14.5.2. Third-Party Logistics

14.5.2.1. Specialize in handling logistical activities for their client.